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Dollar Tree (DLTR) Up 13.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Dollar Tree (DLTR - Free Report) . Shares have added about 13.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dollar Tree due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Dollar Tree's Q4 Earnings Beat Estimates, Sales Miss
Dollar Tree reported fourth-quarter fiscal 2020 results, wherein earnings surpassed the Zacks Consensus Estimate while sales lagged the same. Further, both metrics improved year over year. Results gained from robust same-store sales (comps) across both formats, improved gross margin and lower costs.
The company noted that the expanded Crafter’s Square assortment has been launched in all stores across the United States. Also, the expansion of the Dollar Tree Plus! initiative to 500 stores has been initiated. Moreover, its Family Dollar segment has joined hands with Instacart for H2 stores and is receiving positive feedback for the same. Apart from these, management announced a new Combination Store format, which was tested in nearly 50 small towns and rural communities during fiscal 2020 and has been performing well.
Quarter in Detail
Dollar Tree’s earnings skyrocketed 310% year over year to $2.13 per share and surpassed the Zacks Consensus Estimate of $2.12.
Consolidated net sales rose 7.2% to $6,767.9 million and missed the Zacks Consensus Estimate of $6,774 million. Enterprise same-store sales grew 4.9% on a constant-currency basis and 5% from the impact of foreign currency movements. Comps growth was backed by an 8.1% improvement in Family Dollar stores and a 2.4% rise in Dollar Tree.
Quarterly gross profit improved 9.8% year over year to $2,152.8 million, while gross margin expanded 80 bps to 31.8%. The expansion was mainly a result of positive sales mix, lower markdowns, leverage on occupancy costs due to robust comps and better shrink, partly negated by elevated freight and distribution costs. Notably, gross margin contracted 10 bps at Dollar Tree, while the metric expanded 200 bps at Family Dollar segments.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, declined 540 bps to 21.7% due to incremental pandemic-related costs of $17.2 million, which are primarily related to the payment of premium wages to frontline workers, field management bonuses, and store cleaning and PPE supplies.
Operating income surged 173% to $681.6 million, while adjusted operating margin expanded 90 bps to 7.5%. Dollar Tree’s fiscal fourth-quarter operating income included $24.8 million of additional operating costs related to the coronavirus outbreak. Segment-wise, the company incurred additional costs of $13.8 million at Dollar Tree, $10.6 million at Family Dollar, and $0.4 million for Corporate, Support and Other. Notably, operating margin remained flat at 16% for Dollar Tree. Meanwhile, it recorded operating income of $183.6 million as compared to the year-ago quarter’s operating loss of $238.9 million at Family Dollar segments.
Balance Sheet
Dollar Tree ended the quarter with cash and cash equivalents of $1,416.7 million. It also repaid $300 million in legacy Family Dollar note in the quarter under review. Net merchandise inventories decreased 2.7% to $3,427 million. Moreover, it had net long-term debt (excluding current maturities) of $3,226.2 million and shareholders’ equity of $7,285.3 million as of Jan 30, 2021.
In fourth-quarter fiscal 2020, the company bought back 1,828,174 shares worth $200 million. This led to $400 million remaining under its existing authorization. Post this, management hiked its share repurchase capacity by $2 billion. Currently, it has nearly $2.4 billion remaining under its share-buyback plan. The company expects to incur capital expenditures of about $1.2 billion for fiscal 2021.
Store Update
In fourth-quarter fiscal 2020, Dollar Tree opened 124 stores, expanded or relocated 11 outlets, and shuttered 45 stores. It also completed the renovation of 106 Family Dollar stores to the H2 format. As of Jan 30, 2021, the company operated 15,685 stores in 48 states and five Canadian provinces.
Dollar Tree now plans to open 600 stores in fiscal 2021. Out of these, 400 stores will be Dollar Tree and the rest will be Family Dollar stores, consisting of both H2 and Combination Store formats. Additionally, it expects to complete 1,250 Family Dollar H2 renovations in fiscal 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Dollar Tree has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Dollar Tree has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Dollar Tree (DLTR) Up 13.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Dollar Tree (DLTR - Free Report) . Shares have added about 13.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dollar Tree due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Dollar Tree's Q4 Earnings Beat Estimates, Sales Miss
Dollar Tree reported fourth-quarter fiscal 2020 results, wherein earnings surpassed the Zacks Consensus Estimate while sales lagged the same. Further, both metrics improved year over year. Results gained from robust same-store sales (comps) across both formats, improved gross margin and lower costs.
The company noted that the expanded Crafter’s Square assortment has been launched in all stores across the United States. Also, the expansion of the Dollar Tree Plus! initiative to 500 stores has been initiated. Moreover, its Family Dollar segment has joined hands with Instacart for H2 stores and is receiving positive feedback for the same. Apart from these, management announced a new Combination Store format, which was tested in nearly 50 small towns and rural communities during fiscal 2020 and has been performing well.
Quarter in Detail
Dollar Tree’s earnings skyrocketed 310% year over year to $2.13 per share and surpassed the Zacks Consensus Estimate of $2.12.
Consolidated net sales rose 7.2% to $6,767.9 million and missed the Zacks Consensus Estimate of $6,774 million. Enterprise same-store sales grew 4.9% on a constant-currency basis and 5% from the impact of foreign currency movements. Comps growth was backed by an 8.1% improvement in Family Dollar stores and a 2.4% rise in Dollar Tree.
Quarterly gross profit improved 9.8% year over year to $2,152.8 million, while gross margin expanded 80 bps to 31.8%. The expansion was mainly a result of positive sales mix, lower markdowns, leverage on occupancy costs due to robust comps and better shrink, partly negated by elevated freight and distribution costs. Notably, gross margin contracted 10 bps at Dollar Tree, while the metric expanded 200 bps at Family Dollar segments.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, declined 540 bps to 21.7% due to incremental pandemic-related costs of $17.2 million, which are primarily related to the payment of premium wages to frontline workers, field management bonuses, and store cleaning and PPE supplies.
Operating income surged 173% to $681.6 million, while adjusted operating margin expanded 90 bps to 7.5%. Dollar Tree’s fiscal fourth-quarter operating income included $24.8 million of additional operating costs related to the coronavirus outbreak. Segment-wise, the company incurred additional costs of $13.8 million at Dollar Tree, $10.6 million at Family Dollar, and $0.4 million for Corporate, Support and Other. Notably, operating margin remained flat at 16% for Dollar Tree. Meanwhile, it recorded operating income of $183.6 million as compared to the year-ago quarter’s operating loss of $238.9 million at Family Dollar segments.
Balance Sheet
Dollar Tree ended the quarter with cash and cash equivalents of $1,416.7 million. It also repaid $300 million in legacy Family Dollar note in the quarter under review. Net merchandise inventories decreased 2.7% to $3,427 million. Moreover, it had net long-term debt (excluding current maturities) of $3,226.2 million and shareholders’ equity of $7,285.3 million as of Jan 30, 2021.
In fourth-quarter fiscal 2020, the company bought back 1,828,174 shares worth $200 million. This led to $400 million remaining under its existing authorization. Post this, management hiked its share repurchase capacity by $2 billion. Currently, it has nearly $2.4 billion remaining under its share-buyback plan. The company expects to incur capital expenditures of about $1.2 billion for fiscal 2021.
Store Update
In fourth-quarter fiscal 2020, Dollar Tree opened 124 stores, expanded or relocated 11 outlets, and shuttered 45 stores. It also completed the renovation of 106 Family Dollar stores to the H2 format. As of Jan 30, 2021, the company operated 15,685 stores in 48 states and five Canadian provinces.
Dollar Tree now plans to open 600 stores in fiscal 2021. Out of these, 400 stores will be Dollar Tree and the rest will be Family Dollar stores, consisting of both H2 and Combination Store formats. Additionally, it expects to complete 1,250 Family Dollar H2 renovations in fiscal 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Dollar Tree has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Dollar Tree has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.